1. 7Tin（青亭网）
Finance

2. Learning Objectives
Explain the sources and availability of finance to a startup or growing business
Analyze the benefits of different types of finance and list the priority order to finance

3. What are the Different Categorises of Finance?
Internal Funds
Debt
New Equity

4. Discussion Questions
What do you think the benefits of the different types of financing are?
Which one do you think is best and why?

5. Pecking Order Theory
Pecking order theory starts with asymmetric information as managers know more about their companies prospects, risks and value than outside investors.
Companies prioritize their sources of financing
First preferring internal financing
Then debt
Lastly raising equity as a “last resort”
Asymmetric information favours the issue of debt over equity as the issue of debt signals the boards confidence that an investment is profitable and that the current stock price is undervalued (were stock price over-valued, the issue of equity would be favoured).
The issue of equity would signal a lack of confidence in the board and that they feel the share price is over-valued. An issue of equity would therefore lead to a drop in share price.
In corporate finance, pecking order theory (or pecking order model) postulates that the cost of financing increases with asymmetric information.

6. Case Study: 7Tin
Devoted to virtual reality and augmented reality industry, 7tin is a vertical media in China and an incubator for VR AR startups
7tin reports the latest news and analysis about VR AR industry, companies and entrepreneurs; integrates industry resources, connect technologies and provide marketing services for enterprises under incubation in the 7tin incubator

7. Case Study: 7Tin In their own words:
Financing may be the start-up's most important ability. In Europe there are more venture capitalists. In China there are not so many venture capitalists, investment is based on trust; many decisions are based on your past experience and the recognition of your past friendship
I personally think that it is more important to raise the most money in the shortest possible time. Because what happens today is very clear, but you don’t know what will happen in the future
As a serial entrepreneur for many projects, I think I will prepare at least an 18 month financial safety net. I think this is a very important time boundary

8. Pre-video Discussion
Can you predict what category or categories of finance 7Tin use?
Why do 7TIN keep the 18-month safety periods?
What kind of investors are suitable for 7Tin?
What’s the difference between finance for a start-up, compared to a mature company?

9. Video
Embed/show video

10. Case Study Discussion Questions
Why was 7Tin financed the way it was and why might that decision have been made?
Discuss whether Pecking Order Theory is still relevant today, in the light of high tech firms and firms who want to be global from inception etc.
In what situations might Pecking Order Theory not be still relevant today?

11. References
Brealey, R.A., Myers, S.C., Allen, F. (2008). Principles of Corporate Finance. McGraw-Hill/Irwin, New York.
Myers, S.C., Majluf, N.S. (1984). Corporate financing and investment decisions when firms have information that investors do not have, Journal of Financial Economics,13 (2): 187–221.